How iron ore prices will affect the cost of rolled metal

At an iron conference at the London Metal Exchange in London, a Citi analyst explained to delegates that iron ore prices should be "slightly lower next year," while coal may rise in value. As a result, steel prices will remain moderate but not fall, said Tracy Liao, an analyst at Citi.

According to Liao, the average price of 62% iron ore supplied to China could fall to $ 80 per tonne in 2020 from $ 94 per tonne in 2019 and then fall to $ 60 per tonne in 2021 and 2022. years. This level will be close to the 2018 average price of $ 69 per tonne, which remains until disruptions this year.

“Iron ore has had a significant year,” in 2019, due to production disruptions in the Brazilian Valley and due to Australian cyclones that resulted in a “significant drop” in shipping, she said. The industry is now "basically returning to its previous level." Of the 90 million tonnes a year that Weil said it will lose from the tailings dam accident in January, 30 to 40 million tonnes a year have now returned. However, the weather-related destruction could continue, she said.

“The trend is to gradually reduce prices, but the path will be very bumpy,” Liao said.

Iron ore and pellet surcharges are under pressure from abundant supply and weak steel production margins, she said, with price differentials between 65%, 62% and 58% Fe also well below 2017/2018 levels, she said.

For 65% Fe iron at Citi, average prices fell to $ 91 /t in 2020 from $ 107 /t in 2019, then declined to $ 67 /t in 2021 and $ 65 /t in 2022, well below the $ 90 /ton average. 2018 year.

Liao said the slower growth in coal demand this year was due to weak purchases from China and India, although there has been a modest rebound recently and prices are likely to improve from current levels. “Reliable imports from China should boost purchases of coking coal from Australia,” she said, noting that FOB prices in Australia are now significantly reduced compared to domestic prices in China.

Growth in offshore supplies is likely to remain subdued until 2021, while an increase in blast furnace volumes in China should support demand for hard coking coal, she said.

According to Citi research, average hard coking coal prices are USD 185 per tonne this year, falling to USD 170 per tonne in 2020, USD 160 per tonne in 2021 and USD 150 per tonne in 2022.

Steel forecasts are moderate because while it is expected that in advanced economies,